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30 May 2011

Factors affecting Cross-Border Acquisitions of Copyrighted Works

Cross-border acquisitions of works protected by copyright (such as books, music and films) may not be directly affected by the laws of both the country from which the work is acquired and the country into which the work is brought. After all, one of the fundamental principles of contract law is that parties are free to determine the terms of the agreements into which they enter, and that freedom extends to allowing the parties to a contract to choose which law would govern them.

Nonetheless, negotiations relating to the cross-border acquisitions of copyrighted works cannot be undertaken in a manner which completely dissociates itself from the provisions of the laws in the relevant countries. Among the factors which would have to be considered are substantive differences in copyright law, tax implications, and the so-called procedural differences between the laws of the two countries.

Although taxation provisions may, at first glance, appear to be unrelated to the terms of an acquisition agreement, it is critical to understand the tax implications so as to determine the kind of agreement which is most appropriate. In practical terms, from a copyright point of view, there may be little difference between a copyright assignment (i.e. a transfer of copyright ownership) for a limited time, and an exclusive licence for the same length of time. However, the taxes payable in respect of an assignment of copyright and the grant of a copyright licence (which does not involve a transfer of copyright ownership at all) may vary greatly. As a result, from a commercial point of view, the quantum of taxes payable upon the acquisition of a copyrighted work may be a critical factor in determining the nature of the agreement which is entered into.

As far as the substantive provisions of copyright laws are concerned, it would be necessary to note such aspects as differences in the term of copyright, the ownership of copyrighted works, and the recognition of moral rights. This is because, despite all of these factors falling within broad internationally-accepted parameters regardless of jurisdiction, they are not identical in all jurisdictions.

The duration of the subsistence of copyright in a protected work, for example, may depend on not just the nature of the work but also the date of the death of the author of the work or the date of the publication of the work. In addition to this, the length of the term of copyright protection varies in different jurisdictions.

In addition to this, the emergence of two very different theories of copyright: the continental author-focussed copyright and the American view of copyright as an economic right has resulted in there being fundamental differences in the approach of different jurisdictions to copyright law. For example, some jurisdictions simply do not recognise the moral rights of an author, some require that those rights be specifically asserted to be enforceable, while others automatically recognise that an author has moral rights in respect of his works from the time of their creation. Of course, there are also subtle variations within and a number of exceptions to these three broad categories, which would also need to be considered.

The ownership of copyrighted works too may be an issue. Indian copyright law, for example, does not recognise “works for hire” in the manner contemplated by §101 and §201(b), Title 17 of the US Code. In India, the ownership of copyrighted works created by employees is contemplated in relation to Section 17 of the Indian Copyright Act, 1957 — a Section which, unlike US law, does not contain provisions allowing an employer to be deemed to be the author of a copyrighted work created by an employee.

Further, there may be differences in who can grant rights in a copyrighted work in cases where there is more than one owner. Some laws clearly differentiate between joint owners and co-owners, and do not require certain grants of rights to have been granted by all of the owners to be valid, while other laws barely differentiate between the various kinds of copyright owners.

The ability of any one owner of a copyrighted work to grant rights in a copyrighted work without the consent of the other owners is also very closely related to the divisibility of copyright in protected works — an area which is itself subject to much contention.

Leaving aside such procedural matters as who the parties to an acquisition agreement should be, it is also pertinent to note that jurisdictions may follow laws which contain special provisions that are specific to those jurisdictions. For example, under Indian law, if the duration and territory of the grant of rights are not mentioned in an acquisition agreement, the grant of rights is deemed to apply to the territory of India for a period of five years. This provision is not one which is internationally recognised, and just as India has its own special provisions, other jurisdictions have theirs.

While negotiating a contract involving a cross-border acquisition of a copyrighted work, it is necessary to keep all of these factors in mind, so as to determine what the most appropriate terms to be incorporated into the agreement are. Due to this, cross-border acquisitions of copyrighted works are rarely simple deals.

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